Competition Appeal Tribunal Ruling

26 November 2010

On 12 November 2010 the Court of Appeal found that the CAT has no power to extend the time periods for bringing a claim for follow on damages under the Competition Appeal Tribunal Rules ("the CAT Rules"). Any claim must be brought within the 2 year time limit detailed in Rule 31 of the CAT Rules.

Emerson – the origins of the CAT's power

In Emerson Electric Co and others -v- Morgan Crucible and others ([2007] CAT 280) the CAT concluded that under Rule 19 of the CAT Rules it had the power to extend the time during which a claim for follow on damages must be brought in the CAT.[1]

Background – BCL -v- BASF

In 2001 the European Commission published its decision on the "Vitamin Cartels". BASF (one of the addressees of the decision) launched an appeal against the level of the fine imposed by the EC, but did not appeal the finding of infringement. On 16 March 2006 the Court of First Instance gave judgment on the appeal against the level of fine, which BASF did not appeal to the European Court of Justice.

On 12 March 2008 and 14 May 2008 two follow on damages claims were bought against addressees of the Vitamin Cartels decision. The first claim was brought against BASF and the second against a number of addressees (which included BASF).

In September 2008 the CAT concluded that both claims for follow on damages had been brought within the two year limitation period under Rule 31. The CAT reached this conclusion because BASF had made an appeal against the Vitamin Cartels decision and the period under Rule 31 did not start to run until both the appeal had been determined and the period for making a further appeal had expired.

In May 2009 BASF appealed against this decision. The Court of Appeal overturned the CAT's decision and ruled that the period under Rule 31 had elapsed for both claims on the basis that only appeals against the finding of infringement and not the level of penalty should be taken into account when calculating the period under Rule 31. As BASF had made an appeal against the level of fine but not against the finding of infringement the period under Rule 31 was not affected. The limitation period therefore expired two years after the deadline for appealing the finding of infringement and not two years after the deadline for appealing the Court of First Instance's decision on the level of the penalty.

Both Claimants then applied to the CAT for an extension of the period under Rule 31 as referred to in Emerson. In November 2009 the CAT acknowledged that it had this power but rejected an application from both sets of claimants that the period under Rule 31 should be extended under the CAT's powers in Rule 19 of the CAT Rules. In refusing to exercise its discretion the CAT applied a two stage test which required it to:

(a) consider whether the claimants had demonstrated that there was a good reason to extend the time limit; and then

(b) exercise its discretion as to whether to grant an extension.

The Court of Appeal decision

On 12 November 2010, the Court of Appeal upheld the CAT's decision that the claims could not proceed. It also addressed the following question:

Do the CAT Rules grant the CAT the discretion to extend the limitation period for bringing a follow on claim?

In answering this question the Court of Appeal conducted a detailed analysis of the CAT Rules. It compared rules that specifically give the CAT the power to extend time limits for bringing claims (e.g. Rule 8(2) regarding appeal proceedings) to Rule 19 (which the Claimants argued gave the CAT the power to extend the period under Rule 31). The Court of Appeal noted that the relevant part of Rule 19 referred to the power to give directions on the "abridgement and extension of time limits, whether or not expired"[2] under the heading of "Case Management".

The Court of Appeal concluded that Rule 19 of the CAT Rules did not give the CAT a discretion to extend the period under Rule 31. The reasoning for the decision was:

(a) If Rule 19 was intended to give the CAT a power to extend the period under Rule 31 such a power would have been specifically expressed in the CAT Rules;

(b) The powers under Rule 19 apply to case management directions and not matters such as allowing proceedings to be brought later than they otherwise should be;

(c) The wording of the relevant part of Rule 19 is such that if it gives the CAT the power to extend the period under Rule 31 it must also give the CAT the power to reduce the period under Rule 31. The Court of Appeal concluded that allowing the period under Rule 31 to be reduced could not have been what was intended by the CAT Rules. Consequently Rule 19 cannot have been intended to provide a basis for the extension of the period in Rule 31.

The Court of Appeal likened the application of it's decision to the general laws under the Limitation Act.

Conclusion

This is a key decision for any party involved in bringing or defending a follow on damages claim as it brings welcome clarification to the application of Rule 19 and the period under Rule 31. As the CAT has no power to extend the period under Rule 31, the need for a clear analysis of Rule 31 as soon as a claim is contemplated is even more acute.

Although the impact of this decision can be managed by practitioners, it does serve to limit the ability of a claimant to bring a claim in the CAT and is therefore unlikely to be welcomed by those advocating the increased availability of private enforcement of competition rights.

On a practical note the Court of Appeal recommended that if a claimant is short of time to bring a claim and prepare all the documents and submissions required by the CAT Rules, they "could issue a claim form in short form, and then seek directions permitting it to be supplemented or amended".